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Poverty Lines in India: Reflections After the Patna Conference

T.N. Srinivasan *

1. Introduction

Convened at the initiative of the chief Minister of Bihar, Shri Nitish Kumar, an

international conference on poverty was held in Patna during July 20-22, 2007. In his

inaugural speech, notable for its absence of populist rhetoric and pointing fingers, he raised

serious issues in poverty measurement. In Bihar, the number of poor identified by its

household census significantly exceeded the estimates the Planning Commission based on

NSS data. While Bihar has to devote resources to alleviate the poverty of the poor it

identified, resources transferred to it by the Planning commission are based on its own

estimates, thus putting pressure on the limited resources of Bihar. The Chief Minister also

explained what his government is doing in education and health and its achievements in

repairing the consequences of decades of neglect.

In assessing the experience with the definition and use of poverty lines in India, it is

best to start with their potential roles. A poverty line serves two roles: a normative role and a

monitoring role. Defined as a social norm in terms of per capita real income or consumption,

it plays a normative role by dividing the population into poor, who do not meet the norm, and

non-poor, with the associated social obligation to eradicate poverty through the design of
*
Samuel C. Park Jr. Professor of Economics, Yale University and Non-resident Senior
Fellow, Stanford Center for International Development, Stanford University. I thank Mahvish
Shaukat for her research assistance. This is a revised and expanded version of the paper I
presented at the International Seminar on Revising the Poverty Issue: Measurement,
Identification and Eradication, Patna, July 20-22, 2007. I thank my discussants T.C.A. Anant
and Errol DSouza and the chair of my session, Pronab Sen for their comments. I thank
Angus Deaton for his comments. None of them are responsible for the contents of this
version.

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appropriate policies and their effective implementation by devoting adequate resources. It also

serves a second role in monitoring the trends in poverty and the assessment of poverty

alleviation policies. However, almost any poverty line including the official one could serve

the monitoring role, but not the normative one. With these two roles in mind, I first describe

in Section 2 the evolution of poverty lines in India from a historical perspective. Section 3 is

devoted to a discussion of some issues relating to current official poverty lines. In Section 4 I

discuss whether it makes sense to anchor poverty lines in average energy norms, as the

official poverty lines do. Section 5 concludes with a new approach to poverty measurement

and some suggestions for broadening the concept of poverty. It also briefly comments on

some of the current poverty alleviation policies.

2. A Historical Perspective

The overarching development problem in India has been and continues to be the

eradication of mass poverty. More than a century and quarter ago, Dadabhai Naoroji read his

classic paper on Poverty of India before the Bombay Branch of the East Indian Association of

London in 1876. The main point of Naorojis paper was to show that under the present

system of administration, India is suffering seriously in several ways and is sinking in

poverty (Naoroji, 1899, p. 81) 1 . He argued that the system of government was despotic to the

Indians who have not the slightest voice in the expenditure of the revenue, and therefore in
1
In fact, he had placed the contents of his paper (reproduced in Naoroji (1899) before the Select Committee on
Indian Finance of the British House of Commons in 1872. But they were taken but were not published with the
Report [of the committee], as they did not suit the views of the Chairman [Naoroji (1899), footnote 1, p.1). The
paper is also notable for its meticulous calculation of Indias output and income (through direct and indirect
methods). Interestingly, Naoroji comments on the paucity and unreliability of available data and goes on to
chide the official statisticians of his day for their inappropriate use of simple, rather than appropriately weighted,
average of prices. It is worth quoting him, Not only is the quantity of information insufficient, but the quality
even of such as is given is defective. For instance, in the tables of prices of produce in the different districts of
the Central Provinces, in order to get an average, the prices are added up together, and the total is divided by the
number of the districts. This principle is generally adopted by the returns made by all Governments with respect
to average of produce or prices. The principle however is altogether fallacious. In taking the average of prices
the quantities of produce sold at the different prices are altogether lost sight of. In the same way, in taking the
average produce per acre, the extent of land yielding different quantities is overlooked. (Naoroji, (1899), p.3).

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the good government of the country. The power of the government being absolutely arbitrary

and despotic, and the government being alien and bleeding the effect is very exhausting and

destructive indeed (ibid, p x). I do not wish to dwell on Naorojis estimates of the drain on

Indias income by the British. But his attempt to show that Indias gross output was hardly

sufficient to provide subsistence to its population leads him to estimate subsistence needs

carefully and thereby estimate a subsistence based poverty line at 1867-68 prices, though of

course he did not use the phrase poverty line.

Naoroji defines subsistence as what is necessary for the bare wants of a human being,

to keep him in ordinary good health and decency (ibid, p. 25). For ascertaining the necessary

consumption for the year 1867-68, the year for which he had calculated the value of

production, he starts with the scale of diet prescribed by the Government Medical Inspector of

Emigrants in March 26, 1870 to supply the necessary ingredients for the emigrant coolies

during their voyage living in a state of quietude (ibid, p. 25, emphasis added). Thus, this diet

does not include the energy requirements for work. He found it to be similar to the scale of

provisions for ships carrying Indian emigrants to British and foreign colonies west of the

Cape of Good Hope prescribed in the administration report for 1870-71. Both diets include

rice or flour, dal, mutton, vegetables, ghee, and vegetable oil and salt. The administration

report also included tobacco, firewood, and spices, but Naoroji omitted them in calculating

the cost of subsistence. Evaluating the medical inspectors diet at Ahnedabad prices he came

up with a figure of Rs 5/2/10 per month or Rs 62/2 per year per adult. He goes through similar

calculations for various regions of India drawing the diets from different sources 2 . He also

assumes that out of children under 12, who constituted 34% of the population, only half cost

2
Besides the diets of the Medical Inspector and the administration report, the others included the absolute
necessities of a common agricultural labourer in Bombay Presidency and the cost of living of inmates in jails in
various provinces.

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one-half of adult subsistence (primarily working children) and that the other half do not cost

anything at all. Thus, cost of subsistence per capita of a family would be three-fourth of the

cost per adult. This leads him to a subsistence costs based poverty line, varying from Rs 16 to

Rs 35 per capita per year in various regions of India. Comparing the poverty lines with the

value of output of each region, he concludes that even for such food and clothing as a

criminal obtains, there is hardly enough of production even in a good season, leaving alone all

little luxuries, all social and religious wants, all expense on occasions of joy and sorrow, and

any provision for bad season It must, however, be borne in mind that every laborer does not

get the full share of the average production. The high and middle classes get a much larger

share, the poor much less, while the lowest cost of living is generally above the average share.

Such appears to be in condition of the masses of India. They do not get enough to provide the

bare necessaries of life. (ibid, p. 31, emphasis added).

Naorojis explicit calculation of subsistence cost is not only the earliest of Indian

poverty lines, but it illustrates one of many approaches for defining a poverty line, namely, as

the value of a specified bundle of goods at appropriate prices. Moreover, as he himself

recognizes, his subsistence diet based poverty line not only does not include energy

requirements for work, but also little luxuries, social or religious wants, expense on

occasions of joy and sorrow as he eloquently describes them. Clearly some of these expenses

are unavoidable, regardless of a persons status and are socio-culturally determined. They can

also change over time. As Adam Smith pointed out long ago, a linen shirt was a necessity and

not a luxury for people of Britain in the late eighteenth century. Naoroji recognizes the

importance of income risk faced by the poor, in particular due to vagaries of production. Of

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course, poor face production and consumption risks arising from many factors including

morbidity and mortality, etc.

The official poverty lines in 2004-5(Planning Commission (2007)) were Rs 356.30 in

rural areas and Rs 538.60 in urban areas or a weighted (by population of the poor) average of

Rs 401.12. The prices of the commodities in Naorojis subsistence diet in 1867-68 must have

increased greatly between then and 2004-5. Let me take the mid point Rs 25.5 or Rs 2.13 per

month, of the range Rs 16 to Rs 35 used by Naoroji, and compare it with the weighted

average of all India poverty line of Rs 401.12 at 2004-05 prices. The implicit inflation to

make the two equivalent in real terms would require a rise in prices by 188 times over a

period of 137 years or about 3.85 percent per year on an average. Compared to this rate, the

average rate of inflation in consumer prices between 1950/51 and 2005/06 was higher at

around 6.5 percent per year (Based on Table 0.1, page S1 of MOF (2007)). Since the period

from 1867-68 to 2004-05 included two world wars I suspect that the actual average rate of

inflation during the period must have been even higher. This would suggest that the official

poverty lines for 2004-5 are much more modest than Naorojis 3 .

The second poverty line that I could locate is in the note for the guidance of sub-

committees of the National Planning Committee (NPC) of 1938. The committee had been

appointed by the President of Indian National Congress, Subhash Chandra Bose, with Pandit

Jawaharlal Nehru as chairman. The note was prepared by the committees secretary, Prof.

K.T. Shah in further amplification of the Chairmans Memorandum for the guidance of the

committee dated June 4, 1939. The note clearly states that the fundamental aim [of planning]

is to ensure an adequate standard of living for the masses. . . . Estimates of economists in

different parts of India have put down this irreducible minimum at figures varying from Rs 15
3
In principle it should be possible to revalue Naorojis subsistence basket at 2004-05 prices. I have not done so.

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to Rs 20 per capita per month in the present value of the rupee (IIAPR, 1988, p. 53). The

note further stated that for the present, the minimum standard, which can and should be

reached, an increase of national wealth of between two and three times within the next ten

years [is required] (ibid, p. 54). The implied average annual rate of growth of national wealth

is between 7 percent and 11 percent. The note also drew attention to the need for bringing

about a more equitable distribution of growing wealth. Clearly, the committees view was that

rapid and inclusive growth was the primary instrument to ensure that every Indian had an

adequate standard of living - in other words, to ensure that mass poverty was eradicated.

Interestingly, the note set certain objective tests from year to year for the progress of

the plan. These tests included (1) The improvement of nutrition from the standards of an

irreducible minimum requirement of proteins, carbohydrates, and minerals (as well as

necessary protective foods) having a calorific value of 2400 to 2800 units for an adult worker

(2) The improvement of clothing from the present consumption of about 15 yards on an

average to 30 yards per capita per annum [the actual availability in 2003-04 was 31 meters or

36 yards, according to MOF (2007), Table 1-19, p S-23] (3) Housing standards to reach a

least 100 sq. ft. per capita (ibid, p. 54). Other indices of progress included increases in

agricultural and industrial production, elimination of unemployment and elimination of

illiteracy.

The note unfortunately does not provide the names and references to the papers of

the economists who estimated of the cost of the irreducible minimum standard of living at Rs

15 Rs 20 per capita per month at 1938 prices. My guess is that the estimates were based on

prewar village studies of Gilbert Slater (the first holder of the chair in Indian Economics at the

University of Madras in 1905) and the surveys of the Punjab Board of Socio-Economic

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Inquiry. I have not been able to track these down. Let me take the poverty line of the note of

Prof. Shah at the mid point of the range Rs 15 Rs 20 or Rs 17.50. To make Prof. Shahs

poverty line equivalent to Naorojis, the rise in prices over the 71 years between 1867 and

1938 would have to be 8.2 times or 3 percent a year. I suspect once again that the actual rate

of inflation was probably higher the 3 percent. However in this case, because 1939 was after

a great depression but before the Second World War became intense, it is also possible that

the actual rate of inflation may not have been higher in which case the two poverty lines

would be equivalent. In any case, both Naoroji and Prof. K. T. Shahs note for the NPC

approached the definition of a poverty line from a subsistence or irreducible minimum

standard of living perspective, in which nutritional requirements are implicit

My third poverty line, proposed by the authors of the so called Bombay Plan

(Thakurdas et al (1944)), was a per capita income of Rs 75 per year at prices that prevailed

prior to the outbreak of the Second World War. Since these prices are likely to have been the

same as the prices of 1938 implicit in the poverty line of NPC, the poverty line of the authors

of the Bombay Plan was much more modest than that of the NPC.

The fourth poverty line was recommended by a Working Group of eminent economists

in 1962. After considerable discussion on minimum standard of living, it recommended that

(1) the national minimum for each household of 5 persons (4 adult consumption units) should

be not less than Rs 100 per month at 1960-61 prices or Rs 20 per capita. For urban areas, this

figure will have to be raised to Rs125 per household per capita to cover the higher prices of

the higher prices of the physical volumes of commodities on which the national minimum is

calculated. (2) The national minimum excludes expenditure on health and education, both of

which are expected to be provided by the state according to the constitution and in the height

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of its other commitments (3) An element of subsidy in urban housing will have to be provided

after taking Rs 10 per month or 10 percent as the rent element payable from the proposed

national minimum of Rs 100 per month.

Unfortunately, I could not locate a copy of the report of the Working Group. It would

have been very interesting to find out what their considerable discussion on minimum

standard of living was all about. Though it is impossible to ascertain, it is very likely that the

basket of commodities, and their physical volumes, which formed the basis of their minimum

standard, was derived from nutritional requirements, such as energy requirements in kcals per

day. 4 In any case, the Working Group computed its poverty line by valuing a common basket

of commodities at prices paid by consumers depending on where they lived. They excluded

the subsidy to urban households for housing and also expenditure on health and education to

be provided by the State (presumably at no cost to the consumer) from the poverty line. Since

there was considerable inflation between 1938 and 1960-61, it is clear that the Working

Groups poverty line of Rs 20 per capita per month at 1960-61 prices is much more modest

than the Rs15 Rs 20 per capita per month at 1938 prices of the note of Professor K. T. Shah.

The Working Groups poverty line of Rs 20 per capita per month at 1960-61 prices

was the minimum level of living that was at the heart of the classic paper prepared by the

Perspective Planning Division (PPD) of the Planning Commission under the leadership of the

late Pitambar Pant, entitled Perspectives of Development, 1961-1976: Implications of

Planning for a minimum level of living (reproduced as Chapter 1 in Srinivasan and Bardhan

(1974)).

4
The pioneering study of Dandekar and Rath (1971) used an average nutritional norm of 2250 kcals per capita
per day. From the data on household consumer expenditures in 1960-61, the study found that the norm was met
at a monthly per capita consumption expenditure of Rs 14.2 in rural areas and Rs 22.6 in urban areas at 1960-61
prices. Thus, the nutritional norm based poverty line of the study was considerably below that of the Working
Group for rural areas and slightly higher for urban areas.

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It is evident that the poverty lines of Naoroji, NPC, and the PPD have all been

anchored in a social norm, defined as the cost of subsistence basket of goods by Naoroji,

an irreducible minimum standard of living by the NPC, and minimum level of living by

the PPD. The NPC and PPD, in defining their poverty line as real consumption expenditure

per capita, had a basket of goods in mind as well. All implicitly or explicitly refer to minimum

per capita (nutritional) energy requirements in kcals per day, but none linked the poverty lines

rigidly to them. The PPD paper of 1962 also made two crucial distinctions. The first is

between the basket of goods that households are expected to acquire out of their own incomes

and that consisting mostly of services, which the State was to provide. The value of the

former basket at 1960-61 prices was PPDs poverty line. The second is between households

that are well-integrated with the economys income generation processes and those that are

not, for idiosyncratic (e.g. no earner in the household) and other (e.g. living in remote areas)

reasons. Incomes of the first group will, and those of the second group will not necessarily,

increase in tandem with the growth of the economy. With the PPDs poverty line, it follows

that the reduction of poverty of the first group would be more or less automatic with rapid

growth in income. The poverty of the second group, on the other hand, has to be addressed

through income transfers for long durations of time.

More than 15 years after the Working Group of 1962, a Task Force was appointed by

the PPD to examine projections of Minimum Needs and Effective Consumption Demand. It

came up with a report in 1979 after reviewing the large literature on estimation of demand

systems, particularly the application Stone-Geary linear expenditure system to the grouped

data of household consumption expenditure from several rounds of the National Sample

Survey (NSS). The methodology of the Task Force in arriving at its poverty line has ever

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since been used (with some important modifications suggested by the Expert Group on

Estimation of Proportion and Number of Poor (EGEP), popularly known as the Lakdawala

Committee, appointed by the Planning Commission in estimating poverty lines and poverty

by the Planning Commission.

There is no reason to expect that the poverty baskets associated with the poverty lines

of Naoroji, NPC and PPD would in fact be bought by households at going market prices,

given incomes equaling their poverty lines. Nor were the three poverty lines rigidly linked to

energy norms. The Lakdawala Committee of 1993 attempted both to anchor them rigidly to

average energy norms and also to ensure that the poverty baskets would be bought by

consumers. It defined rural and urban poverty lines as levels of household per capita

consumption expenditure at which average rural and urban energy norms respectively were

met, in the distribution of per capita household consumption expenditure (and its energy

content) in the 28th round (1973-74) of NSS. The consumption baskets bought by the

households with per capita expenditures around the poverty lines were chosen as the poverty

baskets. The average energy norms of 2400 kcals and 2100 kcals per capita per day

respectively in rural and urban areas, were themselves derived by the 1979 Task Force from

energy requirements specified by nutritionists for individuals in difference age/sex/activity

group and the age-sex-occupational structure of the rural and urban populations.

Until the EGEP reported in 1993, poverty lines were updated for changes in prices,

initially by using the wholesale price index and later private consumption deflatore in

National Accounts Statistics (NAS). Also, the average expenditure levels of each expenditure

class in the NSS data of each round was adjusted by a factor representing the ratio of total

private expenditure in the NAS to that from NSS. As is to be expected, The adoption of

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uniform [across the states] calorie norms and fixed consumption basket, base year price

differentials and uniformity of deflation across the states as also the practice of adjusting NSS

distribution [to reflect the same total expenditure as NAS] have been widely contested

[EGEP (1993), p 14]. The EGEP addressed these issues.

The EGEP noted that the Task Forces poverty lines were anchored in given calorie

norms and associated all-India consumption baskets. The latter were the observed

consumption baskets of households with per capita consumption expenditures around the

poverty line for rural and urban areas. It discussed two alternative updating procedures. The

first would revalue the base-year (1973-74) consumption basket with prices in any later year

of the commodities in the basket. The second will compute a fresh poverty line (rural and

urban) for each later year by looking for that expenditure per capita at which base year

average calorie norms were met, given the distribution of consumption expenditure for that

year. The EGEP (and the Task Force of 1979) opted for the former. For a price (or more

precisely, a price index) to be used in resolving the base-year consumption basket, the EGEP

recommended the use of commodity group price indices from Consumer Prices for

agricultural laborers to construct a price index for revaluing the base year rural consumption

basket. A similar procedure using group indices from Consumer Prices for industrial workers

was recommended for revealing the urban base year consumption basket. The EGEP did not

favor adjusting NSS consumption expenditure distribution to bring it to conformity with NAS

estimates. The EGEP recommended procedures have been in place since its report in 1993.

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3. Current Official Poverty Lines: Some Issues

It would seem that the main objective of the Lakdawala committee was to anchor

official poverty lines in nutritionally based average energy requirements. Thus, it defined the

poor as those who cannot meet the average energy requirements, and hence are energy

deficient relative to the average norms. I come back to the issue whether such use of average

energy norms for defining poverty makes sense in the next section. For the rest of this section

I will proceed as if it makes sense. The Committee and the Planning Commission following

it, take an indirect route for estimating the energy deficient, and hence poor. It consists of

first estimating the per capita household expenditure at which the average energy norm is met,

and then, with that expenditure as the poverty line, defining as poor as all persons who live in

households with per capita expenditures below the estimated value. Implicit in this procedure

is the assumption per capita household energy intake is a monotonic increasing function of the

household per capita expenditure and there is no heterogeneity across households in this

relationship. Thus households with per capita expenditures above the poverty line will have

energy intakes above the average norm and hence will be deemed as non-poor. On the other

hand, the direct route consists of using the observed distribution of per consumer unit energy

intakes households and defines as poor, as the Lakdawala Committee did, as those persons

who live in energy deficient households with per consumer unit energy intake below the

average norm. The direct method altogether skips the determination of the poverty line.

Fortunately the NSS data allow us to use the direct route. From its 26th round, (1971-

72), the NSS has been using 2700 kcals per day per consumer unit (regardless of the

individuals residence (rural or urban), age, sex, activity levels, etc.) as the average energy

intake norm. One consumer unit is a male between ages 20 and 39. A female in the same age

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group is viewed as 0.71 consumer units. Thus the number of consumer units of an individual

relative to a male between 20 and 39 years of age depends on the age and sex of that

individual.

Table 1 gives the proportion of persons living in households with per consumer unit

energy intakes below the norm of 2700 kcals per day in Bihar and All India in 1993-94, 1999-

00, and 2004-05, with the corresponding poverty head-count ratio by the conventional indirect

method given in parenthesis. If we define poor as those with energy intakes below the norm,

as we should if we assume that anchoring of poverty lines in average nutritional norms makes

sense, Table 1A shows that poverty in Bihar and India increased significantly between 1993-

94 and 2004-05, except, surprisingly, in urban Bihar, where there was no change. On the

other hand, the same table also shows that official poverty rates declined significantly

between 1993-94 and 2004-05, except, once again in urban Bihar where there was no change.

It is true the two methods of estimating poverty are not strictly comparable, since the average

per capita energy intake norms of 2400 kcals in rural areas and 2100 kcals in urban areas that

are used in the official method could be below the average norm of 2700 per consumer unit

used by the NSS. Unfortunately the report of the Task Force of 1979 does not give the age-

sex distribution of rural and urban population so that one can convert its per capita norms into

per consumer unit norms.

Interestingly, NSS also collects data on the response of households to a question on

whether they get two square meals a day. It is left to the households how they interpret the

concept of two square meals a day. However, NSS also reports on the assessment by its

investigator whether a households members appear to be getting two square meals a day. The

estimated proportion of households getting two square meals as assessed by NSS

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investigation does not differ significantly from the proportion estimated from the responses of

households themselves. NSS reports tabulate the data month wise, state wise as well as

according to per capita household expenditure and various household types. Table 1B reports

the aggregate data for rural and urban India for 1983, 1993-94, 1999-2000 and 2004-05. It is

evident that not only an overwhelming majority of households in rural and urban India are

getting two square meals a day throughout the year, but the proportion of such households in

increasing over time. If the proportion of households not getting two square meals a day

throughout the year is an indicator of extreme poverty, it is going down. However, the

difference in poverty as measured by the three methods for each of the three years is not only

large but also the trends between years are divergent.

The NSS data on the joint grouped distribution of persons by per capita expenditure

level and per consumer unit energy intakes clearly indicates why the official poverty estimates

could be misleading. I reproduce the joint distribution of Rural and Urban India for 2004-05

in Table 2 (see also Figures 3-6). The distribution for the other two years is similar. Although

as one moves from a lower to a higher per capita expenditure class, the proportion of persons

having intakes below the average norm decreases, nonetheless even in the highest expenditure

class there are a few who have energy intakes below norm. By the same token even in the

lowest expenditure class, there are few persons living in households with energy intakes per

consumer unit that are 20% or more than the norm. NSS Report No 513 (p 37) on nutritional

intakes in 2004-05 comments that the distribution is bimodal and for both rural and urban

areas, one mode is located in the bottom 70 percent of the population and less than 100

percent of the normative calorie intake, and another in the top 30 percentile of the population

and more than 100 percent of the normative calorie intake. It then adds Perhaps the first

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attainment of second mode by the percentile of population indicates the change in

consumption pattern of the household. The meaning of this sentence is opaque. In any case,

the joint distribution clearly indicates that although as one moves from lower to higher per

capita expenditure classes, the average energy intake of household in each class increases,

there is considerable variance around this average.

EGEP (1993, p 14) points out that its preferred method of updating the poverty line of

the base year 1973-74, allows only for changes in prices of the commodities in the

consumption basket associated with the poverty line in the base year. The alternative method,

which it rejected, allows for changes in the consumption basket the food items in which meet

the average calorie norm. Thus, while the calorie norm remains unchanged, the consumption

basket associated with that calorie norm would change. Hence, if there is a change in the

consumption behavior due to shift in individual preference, the two methods of updating

poverty lines would give different results. In particular, the [alternative] method would not

give results comparable over time (ibid, pp. 14-15). It is unclear how the committee

concluded that the results were not comparable over time since it does not define what it

means by comparability of results. Although the poverty consumption baskets vary over

time, their energy contents by construction equal base year aver average energy norms. As

such the fact of their varying per se cannot be viewed as leading to non-comparability of

results.

I am afraid the EGEPs comparison of the two methods and their inter-temporal

comparability is very misleading. First of all, the logic of anchoring the base-year poverty line

in an average calorie (energy intake) norm implies that two requirements have to be met.

First, consumer preferences, as reflected in their choice of a consumption basket, given their

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total expenditure and relative prices in the base year of commodities in the basket, is to be

respected. Second, the food component of the consumers chosen basket has to meet the

average energy norm and this (given the monotonicity and homogeneity assumption

mentioned earlier) uniquely determines the poverty line. Clearly, the preferred method of the

EGEP violates the second requirement in years other than the base year since the consumer

will not necessarily choose the base-year consumption basket in a non-base year, even if he

could have chosen it giving his total expenditures and prices he faced. Moreover, the food

items in the consumers chosen basket of that year may or may not meet the average calorie

norm. In the official estimates of poverty in a non-base year a person is poor (non-poor) if he

could not afford the base-year basket at the prices he faces in that year. Since it does not

require that the consumer choose the base year basket even if he could afford it, it ignores

consumers preferences altogether. Thus affordability of the base year basket is the sole

criterion for determining whether a person or household is poor.

The rejected second method of updating ensures that its consumption basket meets

both requirements in each year. The fact that the basket would vary over time does not by

itself make the results (i.e. poverty estimates) non-comparable over time as asserted by the

EFEP. As long as assumptions of preference homogeneity across households at each point of

time and monotoncity of energy intakes with respect to consumer expenditure hold, those

classified as poor, as intended, will not be able to meet the average energy norms. However

this raises the question whether an average energy norm sensibly anchors poverty.

4. Energy Norms and Poverty Measurement

Thus far I have taken the energy intake norm provides a meaningful nutrition-based

approach to poverty measurement. This is a very questionable assumption. If not meeting the

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average norm is meant to have a serious nutritional implication for a household, the joint

distribution of Table 2 raises serious doubts about such an implication.. For example, a

staggering 62% of persons in rural areas and 63% in urban areas live in household with

energy intakes below 70% of norm or less than 1890 kcals per consumer unit. It is likely that

for many of them the observed energy intake is much less and this is not consistent with

their survival if average energy norm is close to their own energy requirement, given their

age, sex and physical activity. At the other end, in the top expenditure class, 27% in rural

areas, 17% in urban areas live in households with an energy intake of 50% more than the

norm or 4050 kcals and some of them will have even larger intakes. Once again, this does not

make sense. Also as Figures 1 and 2 show, the per capita energy intake of all expenditure

classes seem to be going down over time. This is puzzling. There are many reasons why the

energy intake data for very poor and very rich household in NSS could be biased downward

and upward respectively. Since all of these are well known, I will skip them and turn to the

even more serious question of whether the norms themselves make sense.

First, being averages, the norms need not equal the actual energy requirements of the

subset of households who bought the poverty baskets in the base year. Second, for other

years, not only the average norms of base year are not themselves relevant since

age/sex/occupation distribution of population could have changed, but also with the prices

prevailing in those years different from those of the base year, the households at the poverty

lines will not buy the poverty baskets.

Moreover, the Lakdawala Committee more or less ignored points made in the

supplementary note of Professor Sukhatme to its report. In his note, he points out that

devising a poverty line or minimum standard of living anchored in nutritional norm has no

17
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basis to support it. The level of calorie intake becomes meaningful if along with the norm we

also dwell on the meaning of intra-individual variation [EGEP (1993), p 46]. He denies the

vicious cycle hypothesis that adaptation [to energy intake environment] will lead to

increasingly low productivity, low levels of income and low intake and hence still greater

poverty.

In his experiments, Professor Sukhatme found that the mean square of energy intakes

between individuals was significantly larger than the mean square within individuals. This

suggests that differences in intakes between individuals cannot be deemed as random. In part

they represent differences between individuals in their genetic potential for coping with intake

variation. In part they represent differences between individuals in their experiences in utero

and with the external environment. Indeed, the heterogeneity in intakes among individuals

within the same household expenditure class seen in the joint distribution of Table 2 supports

Sukhatmes view.

In the final paragraph of his note, Sukhatme states Our evidence is conclusive that

higher the intake, higher is the energy expenditure on maintenance. Thus, a person who eats a

lot less than his habitual intake will find that his BMR [Basel Metabolic Rate] is also reduced

by about the same % reduction in [intake] 5 . Mans capacity for work is therefore not

determined by his intake but by the efficiency with which he converts food energy into

metabolisable energy over his homeostatic range of intake (ibid, p 49). In Srinivasan (1981

and 1992), I have tried to formulate Subhatmes ideas into a dynamic model of energy

balance. I am persuaded that Sukatmes work has once and for all demonstrated that our

5
In his remarks at the Patna conference, Ashwani Saith interpreted this as adaptation to low intakes and argued
that such adaptation has costs in terms of possible increases in morbidity and reduction in life expectancy. I am
not persuaded that Sukhatme had such costly adaptation in mind. I interpret him as viewing the efficiency of
conversion of food energy to metabolisable energy as variable and endogenous depending on intake of food
energy as long as the variation in intakes is within the homeostatic range.

18
 14Sept07

official poverty lines, anchored as they have been on the average of energy norms that vary

according to age-sex-physical-activity of individuals, have in fact no foundation in nutrition

science. Thus the current official poverty lines are incoherent, being neither social norms nor

having a foundation on nutritional science.

The incoherence does not necessarily mean that the published trends in poverty-ratios

and poverty gaps using the poverty lines have no value for monitoring purposes. The observed

trends will be meaningful as long as the official basket is deemed sensible as a poverty basket,

whether or not it has any relation to nutrition. In other words, if the official basket is sensible

as a social norm, then monitoring poverty using it would make sense. But then, why treat the

official basket, derived as it was by procedures that lacked coherence, as if it is a social norm?

Why not try to anchor the basket in socio-cultural-economic normative criteria? Doing so will

also address the concern raised long ago by Naoroji that his subsistence approach failed to

allow for all the luxuries, all social and religious wants, all expenses of occasions of joy and

sorrow, and any promise for bad season. Also vulnerability of poor to shocks to output or

health that he raised also has to be taken into account.

5. Broadening the concept of poverty

The incoherence of current poverty lines and the very limited role, if any, they can

play in monitoring poverty call for a new approach to poverty measurement. Useful starting

points for a new approach lie in anchoring poverty lines in social norms and in the distinction

made by PPD between goods and services to be bought by households from their own

resources and those to be supplied by the state, thus providing a meaningful way of

distinguishing the responsibilities of households (i.e. the private sphere) and those of the state

(i.e. the public sphere). Since the poverty of those well-integrated with the income generation

19
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processes will go down in tandem with sustained rapid economic growth, apart from pursuing

policies that promote rapid growth, the state would focus its attention on the poor not in the

economic mainstream 6 . In the public sphere the access to (and the quality of) publicly

provided services and subsidies raises many issues, particularly those relating to the poorer

sections of the population having no or costlier access than others. Indeed, the growing

empirical literature on access issues has been very useful in highlighting the access problems

that poor face. However, the access problems need not necessarily be confined to the poor.

Also whether some services being exclusively provided by the public sector could be more

cost effectively, as well as more equitably, provided by other arrangement is an important

issue. In my view, folding the impact of difficult efficiency and equity issues relating to

services into one of the defining the poverty line or poverty basket of goods and services is

neither feasible nor desirable. Viewing them as another dimension besides consumption in a

multi-dimensional conceptualization of poverty is more fruitful. But collapsing many

relevant but not necessarily commensurate dimensions into a single index defined as an

arbitrarily weighted sum of disparate indexes makes little sense. The Hurman Development

Index pioneered by the United Nations Development Programme is an example of an

arbitrarily weighted sum of non-commensurate indexes. It certainly is not a multidimensional

conceptualization of human development in any meaningful sense but simply yet another

arbitrary uni-dimensional index.

An even deeper question is whether we can anchor the approach poverty eradication in

a rights framework. In other words, can one define a set of rights to which each and every

citizen is entitled qua being a citizen, and the set is broad enough to include those entitlements

6
This is not to say that the poor among those well-connected with the economic mainstream will need no
assistance from the state, but only that such assistance will be limited in extent and also in time, since with
sufficiently rapid growth in income there will be no such poor.

20
 14Sept07

that would preclude the citizen from being poor? If one can do so meaningfully, and ensure

that the rights are respected, then clearly the problem of poverty would not arise. Indeed, a

consensus on many of our poverty alleviation policies such as the national employment

guarantee scheme, public distribution system for essential commodities, education, and health

policies, would come about if they can be rationalized from a rights perspective.

It might seem that we already have a basis for such a perspective in The Directive

Principles of State Policy in Part IV of our Constitution that enunciates certain rights for

Indian citizens. 7 Article 38 enjoins the state to strive to promote the welfare of the people by

securing and protecting a social order in which social, economic and political justice shall

inform all the institutions of national life. The state is also to strive to minimize inequalities

of income, status and opportunities. Article 39A on certain principles to be followed by the

state requires that the state shall, in particular, direct policy towards securing (a) that the

citizens, men and woman equally, have the right to adequate means of livelihood (b) that the

ownership and control of the material resources of the community are so distributed to

subserve the common good; (c) that the operation of the economic system does not result in

the concentration of wealth and means of production to the common detriment; (d) there is

equal pay for equal work; (e) that the health and strength of workers, men and women, and the

tender age of children are not abused and that citizens are not forced by economic necessity to

enter avocations unsuited to their age or strength; (f) children are given opportunities and

facilities to develop in a healthy manner and in conditions of freedom and dignity and that

childhood and youth are protected against moral and abandonment. Article 39B promises

equal justice and free legal aid for securing justice. Article 41 promises that the state shall,

7
The quotes in this paragraph and this that follow are taken from
http://www.commonlii/ong/in/legis/const/2004/6.html

21
 14Sept07

within the limits of its economic capacity and development make effective provision for

securing the right to work, to education, and pubic assistance in cases of unemployment, old

age, sickness and disablement, and in other cases of undeserved want (emphasis added) 8 .

Article 42 covers human conditions of work and maternity relief. Article 43 promises living

wages etc. for workers. Article 45 promised free and compulsory education for all children

below 14 years of age within ten years [i.e. by 1960] of the commencement of the

Constitution.

There can be no doubt that the rights covered by these articles, if ensured, will

eliminate poverty. However, Article 37 almost nullifies the rights by saying that the

provisions contained in this part [Part IV on Directive Principles of State Policy] shall not be

enforceable by any court, but the principles herein laid down are nevertheless fundamental in

the governance of the country and it shall be the duty of the state to apply these principles in

making laws. It is impossible to check whether laws made after the adoption of the

Constitution in 1950 conformed to these principles, since the provisions incorporating the

principles are not enforceable by any court! However the situation has changed after a

Supreme Court decision in 1982 to be discussed below. Moreover, Article 41 by explicitly

referring to the limits imposed by the economic capacity and state of development of the

country further restricts the scope of the rights. Thus, the rights are better viewed as

aspirations to be attained at some indefinite future date 9 . When the limits of economic

capacity and development would no longer apply! For example, the free and compulsory

8
It does not define undeserved want. I wonder what deserved want might mean!
9
In his stimulating and wide-ranging article, Jean Drze quotes Dr. B. R. Ambedkar, the prime architect of
Indias constitution, as saying that The Directive Principles have a great value, for they lay down that our ideal
is economic democracy and his belief that the form of political democracy laid down in the constitution, rather
than justiciability of the Directive Principles, will be the means for achieving the economic democracy that the
principles describe. As Drze rightly argues the evolution of political democracy in India after independence has
not conformed to Ambedkars vision. As a consequence, the Directive Principles have remained largely as
ideals and aspirations to be attained at some distant future.

22
 14Sept07

education of children under 12 promised under Article 45 by the year 1960 is yet to be

achieved.

The fact that the rights enumerated in Part IV of Indias Constitution have remained as

aspirations with no enforcement mechanism and guarantee as to their attainment illustrates a

general problem with rights based approaches. First of all, they encourage a tendency to

proclaim a right for things that are either ill-defined or so comprehensive as to be

meaningless. An example is the so called right to development. Sen (1999) identifies three

broad critiques that have been made against the rights based approach which are relevant for

my discussion. The first relates to the legitimacy of a right, that is whether it confounds the

consequences of legal systems with pre-legal principles. Sen dismisses the legitimacy critique

against human rights by arguing that they are best seen as a set of ethical claims that must not

be identified with legislated rights, and their plausibility should be judged on the basis of

ethical reasoning and as the basis of political demands. The plausibility of only a few of the

rights enunciated in Part IV could be judged on the basis of ethical reasoning alone. In any

case, the Constitution itself is a piece of legislation enacted by the Constituent Assembly of

India and as such, the rights in its Part IV have to be identified with legislated rights.

Sens second critique is one of coherence of the rights approach. It will be incoherent

as long as there is no agency that has the duty to provide and enforce the rights. Prima facie

this critique would seem inapplicable to the rights of Part IV after all, the Indian State is

enjoined to strive to enforce these rights. Yet by making the right not enforceable in a court of

law, it might seem at first blush that the Constitution had in fact made them incoherent. Such

a conclusion is inappropriate in light of the Supreme Courts (SC) decision of 1982 that

broadened the rules of standing and linked Part IV of the Constitution on Directive Principles

23
 14Sept07

of State Policy with Part III that guarantees certain fundamental rights and its Article 32

granting the right to move the Supreme Court to provide a remedy for breach of any of the

rights. Let me briefly describe this evolution drawing on Craig and Deshpande(1989).

These two authors point out that the SC undertook a comprehensive revision of the law of

standing in its decision on Gupta v Union of India. Under traditional rules of standing only

those who had suffered a violation of a legal right had standing to seek judicial redress.

Arguing that this traditional approach arose in an when private law dominated the scene and

public law had not yet born, Justice P.N. Bhagwati enunciated a broad principle of the right of

a surrogate to plead on behalf of disadvantaged members of the society who had suffered a

violation of their rights. By suggesting that this principle can be invoked to protect, for

example, prisoners languishing in jails without a trial or Harijans road workers who are

living in poverty and destitution, Justice Bhagwati expanded the concept of the right of a

surrogate to plead on behalf of the disadvantaged who are unable to approach the Court for

relief themselves into a legal tool for vindication of a public interest broadly conceived. This

decision opened the door for the so called Public Interest Litgation(PIL).

Justice Bhagwati reasoned that Standing had to be broadened because the very purpose of

law itself was undergoing transformation. It was being used to foster social justice by creating

new categories of rights in favour of large sections of people with correspondingly novel

duties imposed upon the state. Individual rights were being supplemented by social rights, and

the former were practically meaningless in todays setting unless accompanied by the social

rights to make them effective and accessible to all. Such social and collective rights were to

be found within Part IVof the Constitution.. (Craig and Deshpande(1989), p 361). This

reasoning was the basis for linking of Parts III and IV. Although the rights in Part IV cannot

24
 14Sept07

enforced through courts directly, they have to be taken into account in determining the content

of the enforceable rights in Part III. Craig and Deshpnade(1989) discuss the implications of

the link between Parts III and IV in detail. Drawing on the work of Raz (1988) on collective

and public goods, they view the link as providing a conceptual foundation for PIL. Clearly the

link makes the otherwise incoherent rights of Part IV somewhat coherent.

The third and last of Sens critiques is whether the values underpinning the rights are

universal, that is, they are shared by all. Since many of the rights in Part IV relate to economic

matters on which there could be and there are differences among Indians. Clearly the claim of

universality for all of them is not tenable. In sum, appealing to Part IV of the Indian

Constitution as exemplifying a rights based approach to poverty is a non-starter in my view.

Instead, it would be desirable to think de novo about a subset of core rights that not only are

clearly based on moral considerations, but also have meaningful operational proxies and make

them unconditional and enforceable. Clearly rights of participation in the political progress,

to justice, education and health would be core rights. In particular, guaranteeing access to the

judicial system and unfettered participation in political processes are vital. After all, a just

system and a fully participatory political process is the ultimate guarantee of all rights.

Indeed Dr. Ambedkars belief that the political democracy of Indias constitution would lead

eventually to economic and social democracy can be explained only if the political process in

practice qualifies as fully participatory.

An unconditional guarantee of education and health does not mean that the state

should also produce and distribute these and related services. Jean Drzes (2004) detailed

discussion of the Right to Food illustrates the many problems in operationalising notions such

as the Right to Food or more generally rights based on Sens concepts of capabilities,

25
 14Sept07

functionings and their relation to entitlements, into a concrete set of claims of individuals on

the society of which they are members. As he rightly points out, merely rephrasing the right to

food as an entitlement to be free from hunger or as a right to nutrition (i.e. to be well-

nourished) does not solve the problem of translating the right to food into a specific set of

entitlements and assigning responsibilities for their provision among constituents of the

society (individuals, households, state and non-state entities). Although he does not touch on

it, it is essential to recognize that a right to food, nutrition or health only means that the

individual is enabled to exercise that right. It does not mean, for example, that the society

provides the individual a specified number of kilograms of food grains, but only that the

entitlements the society endows him with would enable him to acquire the food grains. Any

means of enforcing rights other than through entitling an individual to exercise his or her right

in the way he or she sees fit through socially cost-effective means, would almost surely

intrude into the exercise of individual freedom. Drze points out that making the Right to

Food justiciable is not an unmixed blessing. He cites an example of an undernourished female

child because of discrimination within the family and rightly doubts that the best response

would be to take her parents to court, presumably because the society had assigned the

responsibility for enforcing the childs right to nutrition to its parents.

The problem is far more general. Even the Supreme Courts decision in November

2001in response to a PIL, approvingly cited by Drze, directing all states to introduce cooked

mid-day meals in primary schools within six months, could be faulted on the ground that the

learned courts decision enforces a particular means of improving child nutrition, and not

simply enforcing a right to such nutrition while leaving it to the states to decide on the best

means of improving nutrition. Of course, it could be argued that the provision of cooked

26
 14Sept07

meals is one of the appropriate means of enforcing the right to nutrition and hence mandating

it falls within Justice Bhagwatis broad construction of powers of the Court under Article

32(1) of Part II of the constitution to use whatever direction, order or writ may be appropriate

in a given case for enforcement of a fundamental right

Regardless of their role in legally enforcing public interest, by leaving to judges the

decide as to what constitutes public interest and also the means of enforcement of the public

interest so conceived, PILs have opened the door to judicial activism by judges who may not

fully understand the economic costs and benefits of enforcing their decisions in the aggregate,

as well as their distribution across social groups. The Supreme Court decision setting a

deadline on the enforcement of the use of compressed natural gas (CNG) in buses and other

public vehicles (taxis and auto-rickshaws) in Delhi is an example of such activism.

Presumably the environment has improved (at least from the perspective of visibility) with the

use of CNG but since the deadline came before an adequate capacity to supply and distribute

CNG had been put in place, the cost of the premature deadline was borne in part by poor

drivers of auto-rickshaws who had to spend each night after a long working day in long lines

at the few outlets that distributed CNG. I do not mean to suggest that the setting of deadlines

by the Court is necessarily and always inappropriate after all, its decision came after the

authorities had failed to develop sufficient supply and distribution outlets and the decisions

forced them to do so. But unfortunately, the cost of forcing the authorities to take action that

they should have taken earlier was not apparently borne by the society at large in an equitable

fashion. Of course, the judges cannot and are not, experts in social cost-benefit analysis and

the use of distributional weights. However, there is no reason for them not to solicit such an

analysis by inviting amicus briefs.

27
 14Sept07

The faults and failures in the functioning of administrative, legislative and political

processes led to a rising trend in the use of judicial process in an understandable attempt to

remedy the consequences of the faults and failures. Under the circumstances, the temptation

of the judiciary to overreach is equally understandable. Yet from a long run perspective, this

is not healthy. It will delay, if not undermine, urgently needed reforms of the three branches

of government, the executive, judiciary and the legislatures.

Most of our policy interventions intended to alleviate poverty that are aimed at

providing particular goods (e.g. food) or services (e.g. education) or source of income (e.g.

employment) need reconsideration since they a clear rationale as the only effective mans of

some underlying and well defined rights. For example, the Public Distribution System (PDS),

through the Food Corporation of India (FCI), procures, stores, transports and distributes

commodities at subsidized prices. Given the politicization of the determination of

procurement prices, the inefficiency of FCI, and the out-of-pocket costs of accessing the PDS

for poor households, the PDS is not the most cost-effective means of enforcing a right to food

and other PDS commodities. The National Rural Employment Guarantee scheme provides a

limited employment guarantee and, in addition, there are several other employment generation

programmes. But even if it is efficient and effective it is by no means the equivalent of a right

to livelihood. The policy interventions in education (e.g. guaranteeing a primary school in

every habitation with a population of 500) have been instituted without thinking through their

efficacy in achieving their intended purposes 10 . If the income poverty of the poor is the main

reason for the poor not eating enough or sending their children to work instead of to school,

making appropriate income transfers to them would be far more cost-effective than the current

system. That non-poor might claim to be poor to get such transfers is not a convincing
10
See Kochar (2007) on this.

28
 14Sept07

argument against a transfer scheme since the exclusion of the poor and inclusion of the non-

poor in the current schemes.

A policy of making income transfers to the poor is enabling in that it will enable the

poor to use the transferred resources in ways they think are in their best interest. Since the

poor certainly would not desire to remain poor forever if they can help it, it is reasonable to

presume they would spend part of the transferred resources on education and health and in

investments that would enable them to climb out of poverty once and for all. There is some

evidence that some beneficiaries of the National Employment Guarantee Scheme in

Villupuram, District of Tamil Nadu, in fact did so with their additional wage income (Drze

and Kidambi (2007)). However, instituting an income transfer policy does not completely

absolve the state of its responsibility in education and health. After all, even if the poor wish

to spend the transferred income on education or health, unless there are enough accessible

schools and clinics of appropriate quality, the unconditional guarantee of education and health

will remain unfulfilled. Although private provision of primary education and health should

not be ruled out, ultimately it is the states responsibility to ensure that private providers

satisfy appropriate quality and cost norms through appropriate regulations and to step in to fill

any gaps.

An important implication of any rights-based approach is that the guarantee of rights is

absolute and hence its fulfillment should not be contingent on which level of government

(centre, state or local) is assigned the responsibility of the enforcement of rights in its

jurisdiction. The problem that the Chief Minister highlighted in his inaugural speech arose

from the fact that while his state was responsible for alleviating the poverty of those it

identified using criteria mandated by the centre, the transfer of resources from the centre to

29
 14Sept07

the states was based on different criteria for identifying the poor. On the other hand, in a

rights-based income transfer scheme such as the one advocated in this paper, while the norms

for education or health, etc., that are guaranteed would be common to all citizens of India

regardless of where they live, the state or local jurisdiction with the responsibility to fulfill the

guarantees would determine how they are to be fulfilled as well as the resources needed to do

so in their jurisdiction. However, the sharing of the resource costs of fulfilling the guarantees

between the local jurisdictions responsible for fulfillment and others (the state and centre) has

to be arrived at through a consultative process in which all three, local, state and centre, have

a voice.

Our constitution adopted in 1950 assigned tax bases and expenditure responsibilities

across centre and states, the resulting vertical and horizontal imbalances were to be addressed

through sharing of tax revenues between centre and states as recommended by quinquennial

Finance Commissions mandated by the Constitution. The 73rd and 74th constitutional

amendments have since devolved responsibilities to local governments. After the 73rd and 74th

amendments, states have appointed their own Finance Commissioners to recommend transfers

to local bodies. It remains to be seen whether the state finance commissions will ensure that

local bodies have adequate fiscal resources from their own tax revenues and transfers from the

state and centre to enable them to discharge their responsibilities and also to build the needed

administrative capabilities.

An extra-constitutional body, the Planning Commission, was also established in 1950.

It also began making transfers to states in support of five-year plans. In addition, different

central ministries also made transfers from their budgets in support of centrally sponsored

schemes in states. Over time, relative to the transfers recommended by the constitutionally

30
 14Sept07

mandated Finance Commissions, the other two transfers became quantitatively more

significant. Moreover, in 1950 public enterprises other than railways that produced goods and

services were very few. Over time, the creation and expansion of public enterprises by central

and state governments have had serious impacts on the budgets of centre and states. Whatever

rationale might have been there in 1950 for the constitutional assignment of tax bases and for

the creation of public enterprises, under the vastly changed political and economic

environment of the 21st century, a serious rethinking of the fiscal federalism of our

constitution including the incorporation of local bodies in an organic fashion, the role of the

Planning Commission and planning boards, as well as public enterprises is needed. For

example, mindless and meaningless repetition of the argument that public enterprises making

profits at possibly distorted market prices should not be privatized does not validate it if

there is a social rationale for an enterprise to be in the public sector, its losses, if any, have to

be met from and its profits, if any, have to be absorbed, in the budget.

Rethinking and debate on needed reforms, since they could involve amending the

constitution, will naturally take time. In the meantime, I have suggested (Srinivasan, 2007) the

creation of a Fiscal Policy Review Council (FRC) and reconstituting the Planning

Commission as a Fund for Public Investment (FPI).

The membership of FRC would consist of the Prime Minister and Finance Minister of

India, Chief Ministers and Finance Ministers of States and Union Territories and a few

experts appointed by the Prime Minister in consultation with the chief Ministers. It would be

analogous to the Trade Policy Review Mechanism of the World Trade Organization (WTO)

that enables the members of the WTO to discuss, review and comment on each members

trade policies periodically. The FRC could also learn from the mechanism introduced by the

31
 14Sept07

European Union (EU) under which each member country submits each year a national reform

action plan for review by the European Commission.

The FRC would meet at an appropriate frequency to review the medium and long term

fiscal policies and performance of the states and centre as well as make recommendations. Its

public report ranking of the plans of states and the centre on their effectiveness and efficiency

in achieving agreed targets would be very useful. 11 To avoid political grandstanding and to

encourage serious discussion, the meetings could be closed to the media. Whether the

recommendations should be binding on all parties or only advisory is an issue that the FRC

could decide. Each state Chief Minister and Finance Minister would get an opportunity to

comment on and learn from other states and centers policies. The Prime Minister and the

Finance Minister have to respond to the comments of state leaders on its fiscal policies.

FRCs rankings and recommendations would not only have grater political weight but also

provide a commitment mechanism for the centre and states to undertake reforms which each

may not be able to do unilaterally.

The FPI will operate much like a development bank for providing long term

development finance. It will borrow its loanable funds from domestic and foreign capital

markets with guarantees from its shareholders. It will appraise investment projects of the

centre and states for which they wish to borrow from the FPC, for their feasibility, economic

and social returns and also for the soundness of their means of financing the rest of project

investment, if it is not to be fully funded by the FPI.

The FPI is not mean to be the financial intermediary between state governments and

capital markets at home and abroad as well as external aid agencies. The states will have the

11
Although the proposal of the former Dutch PM, Mr. Kok, to use the mechanism for review of action plans to
name and shame countries which talked a good game but failed to deliver and fame those whose
performance was exemplary, did not go far, there is something useful in the proposal for the FRC to consider.

32
 14Sept07

freedom to borrow directly from capital markets and to negotiate with foreign aid agencies.

Such freedom could lead to some states being able to borrow on attractive terms and attract

aid donors to fund their projects and others not being able to do so. If their failure arises from

the pursuit of poor policies, the FPI by declining to lend could provide an incentive for the

failing states to reform policies to make them more attractive to lenders and donors. On the

other hand, if the FPI finds that the failure has occurred not because of policy inadequacies

and for reasons beyond the control of the state, it could recommend capital transfers from the

centre to such states if it finds the projects proposed by such states to be worthwhile from an

economic and social perspective. However, such FPI-recommended capital transfers should

not carry any subsidy (relative to the cost of borrowing to the Fund) on interest rates. Thus,

FPI should not open a soft lending window since there is no economic rationale for it.

Transfers to a state compensate for the inability to borrow on attractive terms for reasons

other than policy failures should be distinguished from transfers to correct the states

horizontal imbalance. Such transfers would be addressed by the Finance Commission

transfers and not by the FPI.

33
 14Sept07

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 14Sept07

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Srinivasan, T.N. (1992) Under-nutrition: Concepts, measurement and Policy Implications,

in Sadiq Osmami (Ed) Nutrition and Poverty, Oxford, Clarendon Press, pp. 103-09.

Srinivasan, T.N. (2007), Challenges Facing the Indian Economy, Business Line, January
17-19, 2007.

Thakurdas, P., J.R.D. Tata, G.D. Birla, A. Dalal, S. Ram, A.D. Shroff and J. Mathai (1944),
The Bombay Plan for Indias Economic Development: A Brief Memorandum Outlining a
Plan for Economic Development of India, London: Penguin Books.

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Table 1A

Proportion of Persons below Norm (2700 kcals per day) of Household Calorie
Intake Per Consumer Unit *

1993-1994 1999-2000 2004-2005

Bihar (Rural) 0.589 (.580) 0.607 (.440) 0.619 (.421)

Bihar (Urban) 0.594 (.348) 0.593 (.335) 0.598 (.346)

India (Rural) 0.575 (.372) 0.607 (.373) 0.662 (.283)

India (Urban) 0.649 (.326) 0.645 (.324) 0.701 (.257)

* Figures in parenthesis are poverty proportions based on relevant poverty lines.

Source: NSS (1997a, 2001a, 2007a), Planning Commission (2007)

Table 1B

Proportion of Households Getting Two Square Meals

A Day Throughout the Year*

1983 1993-1994 1999-2000 2000-2005

Bihar (Rural) - .928 .939 .967

Bihar (Urban) - .970 .969 .975

India (Rural) .811 .945 .962 .974

India (Urban) .933 .981 .986 ,984

Source: NSS (1997b, 2001b, 2007b)

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 14Sept07

Per 1000 break-up of persons by level of household calorie intake as expressed

percentage of norm level calorie intake (2700 K cal.) (per consumer unit) for each
Table 2: MPCE class in Rural and Urban India
MPCE per 1000 no. of persons with household calorie intake level no. of
Class <70 70-80 80-90 90-100 100-110 110-120 120-150 >150 all classes sample hhs
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
STATE:ALL RURAL
1 619 215 120 33 7 2 3 1 1000 2282
2 395 292 177 91 32 8 5 2 1000 2271
3 293 269 219 135 52 21 10 1 1000 4940
4 202 245 240 174 82 38 16 3 1000 5718
5 138 198 259 194 113 57 37 4 1000 6189
6 101 176 233 218 137 75 55 5 1000 6209
7 78 150 210 216 158 94 82 13 1000 7282
8 48 112 197 220 179 106 120 18 1000 8484
9 46 89 150 199 188 130 162 37 1000 10035
10 33 63 118 177 180 149 215 65 1000 11142
11 18 46 83 136 156 158 280 122 1000 6870
12 16 35 71 95 133 116 261 272 1000 7876
All Class 146 160 185 171 125 81 97 34 1000 79298
persons 8725 10392 13537 13560 10555 7466 10178 4885 79298
STATE:ALL URBAN
1 626 195 119 43 10 3 3 1 1000 2451
2 375 277 208 89 28 18 5 0 1000 2401
3 324 257 225 103 60 15 12 3 1000 4669
4 236 245 220 158 74 33 26 8 1000 4640
5 188 226 254 162 90 46 28 6 1000 3988
6 134 189 254 195 109 62 47 10 1000 3932
7 98 171 237 214 140 80 50 11 1000 3791
8 81 138 215 219 155 90 83 19 1000 3773
9 47 105 198 201 185 117 117 30 1000 4574
10 34 67 166 189 180 142 186 38 1000 5257
11 22 52 105 153 199 149 235 86 1000 3049
12 27 29 66 139 135 133 300 171 1000 2821
All Class 167 167 202 165 118 74 82 25 1000 45346
Persons 7104 6574 7691 7164 5396 3874 5135 2408 45346
Source: NSS (2007a)

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 14Sept07

Figure 1:

Per Capita and Per Consumer Intake of Calories in Rural India

4250
Per Consumer Unit Intake of Calories

4000
3750
3500
3250 1993-1994
3000 1999-2000
(Kcal)

2750 2004-2005
2500
2250
2000
1750
1500
1250
1000

3500
3250
3000
Calories (Kcal) per Capita

2750
2500
2250 1993-1994
1999-2000
2000
2004-2005
1750
1500
1250
1000
0 1 2 3 4 5 6 7 8 9 10 11 12
MPCE Class
Note: Arrows indicate poverty line.

Source: NSS (1997a, 2001a, 2007a)

Figure 2:

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 14Sept07

Per Capita and Per Consumer Intake of Calories in Urban India

4000
Per Consumer Unit Intake of Calories

3750
3500
3250
3000
2750 1993-1994
(Kcal)

2500 1999-2000
2250
2004-2005
2000
1750
1500
1250
1000

3250
Per Capita Intake of Calories

3000
2750
2500
1993-1994
(Kcal)

2250 1999-2000
2000 2004-2005
1750
1500
1250
1000
0 1 2 3 4 5 6 7 8 9 10 11 12
MPCE Class

Source: NSS (1997a, 2001a, 2007a)

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 14Sept07

Figure 3:
Per 1000 Distribution of Persons by Level of Household Calorie
Intake Level in Rural India (2004-2005)
Persons by Calorie

700
600
Intake Level

500 Less than 1890 Kcals

400
1890-2160 Kcals
300
200 Greater than 4050 Kcals
100
0
0 2 4 6 8 10 12
Expenditure Class

Figure 4:
Per 1000 Distribution of Persons by Household Calorie Intake
Level in Urban India (2004-2005)
Persons by Calorie

700
600
Intake Level

500 Less than 1890 Kcals

400
1890-2160 Kcals
300
200 Greater than 4050 Kcals
100
0
0 2 4 6 8 10 12
Expenditure Class

Source: NSS (1997a, 2001a, 2007a)

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 14Sept07

Figure 5:

Per 1000 Distribution of Persons by Level of Household Calorie

Intake Level in Rural Bihar (2004-2005)
by Calorie Intake Level

600
500
400
Persons

Less than 1890 Kcals

300 1890-2160 Kcals
200 Greater than 4050 Kcals
100
0
0 2 4 6 8 10 12
Expenditure Class

Figure 6:

Per 1000 Distribution of Persons by Level of Household

Calorie Intake Level in Urban Bihar (2004-2005)

500
Persons by Calorie

400
Intake Level

Less than 1890 Kcals

300
1890-2160 Kcals
200
Greater than 4050 Kcals
100
0
0 2 4 6 8 10 12
Expenditure Class

Source: NSS (1997a, 2001a, 2007a)

41